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Politics, policy and priorities: Big picture vs detail


As the party conference season comes to an end, there is a depressing lack of direction in Energy policy to discuss. The two big political headlines have been renationalisation of energy and price caps. Both announcements in reality, political plays designed to attract voters- neither announcement adding any value to the market, or in the long run sadly, consumers.

This week we have heard a lot about cough lozenges, bracelets making political statements and ego driven plots to disrupt the political landscape. The micro here and now has, as usual, got far more attention than the macro challenges that the UK faces.

This pattern is repeated in Energy. Ignoring the big political announcements, it feels like we are losing sight of the big picture and getting bogged down in the small stuff, as a judicial review for embedded benefits is announced and huge time, resource and money is focused on delivering a faster switching programme (when according to Energy UK’s research 90% of customers are satisfied with the switching process) as just two examples.

We need to refocus on the big picture- one where innovation and development is accelerating and the old ‘norms’ no longer stand up to scrutiny:

1) The world of ‘supply’ and ‘generation’ is no more: The world where a supply licence and a generation licence suited the vast majority of players in the market no longer exists. Distributed generation, storage, self supply all sit uncomfortably within the traditional framework. There are now multiple layers of market players talking directly to consumers, whether new entrants in established markets, intermediaries such as brokers and aggregators or technology providers focused on energy consumption management, data provision or controls. This is the market today where there are no longer handfuls of participants, but hundreds who are growing and innovating by the day. The established regulatory framework is creaking as it tries to keep up.

2) There are vast amounts of capital ready to be invested: The investor market is desperately trying to find a route to bankable solutions. The capital is there, the will is there and the fundamental belief in the disruptive power of technology and data in energy is there. What is not there are clear investment signals. Beyond 2020 there is a vacuum in direction as the current Levy Control Framework (LCF) expires. On top of the future uncertainty, the pain and shock of recent hard stop reversals in policy, such embedded benefits and onshore wind and solar support, continue to reverberate. The investor landscape is keen but shaky- it is increasingly easy to look overseas for more certainty.

3) By the time that policy and regulation catches up with today’s market, tomorrow’s market will look fundamentally different: The pace of change from the centre is as achingly slow as it has always been. BEIS and OFGEM talk in seasons and years, whilst the market is accelerating in weeks and months. It is not easy, but it feels like too much time is being spent on today’s programme (such as faster switching, half hourly settlement, SMETs2 meters) which may well all be redundant by the time they are delivered. We desperately need to accelerate the shift to a policy and principles framework that allows markets and innovation to thrive. I can only see this happening by stopping some of the ‘big’ resource and cost heavy programmes now to allow the right focus on the developing world.

4) The elephant in the room is the national grid: Not the company, the physical asset. Increasingly innovation is focused on ‘off grid’ solutions, facilitated by the combination of renewables and storage at large or small scale. It will not be long before self supply is a practical reality with minimal (but essential) need for the existing network. Whilst a code review has been started addressing transmission costs, it needs to go way beyond tinkering with the existing framework which has been the historic approach. A genuine future proofed and holistic review of charging across the system is essential to ensure future resilience and market development.

It is easy to be frustrated by political gaming, the pace of policy change and current priorities. However, by adopting an approach of laser focus on the big picture, making difficult choices on what not to do and cancelling some of the existing initiatives, we could quickly get back on track.

Jo Butlin is CEO of EnergyBridge (UK) Limited, a business focused on helping investors and businesses navigate the changing UK energy market. See www.energybridge.co.uk for more information.


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